by Andrew Leckey
How would you invest $10,000 in the coming year?
That's the question I pose to a diverse group of investment and economic experts each year, whether the market is up or down and whether the economy is booming or receding.
Their overall recommendations from a year ago to gradually boost stock investment have been proven correct. Now, with stocks showing real firepower, they're even more confident about suggesting them for 2004. They remain wary of fixed-rate investments, since the worrisome potential for rising interest rates still looms large.
Here's the latest advice from our crystal ball for that 10 grand:
Richard Cripps, chief market strategist, Legg Mason Wood Walker in Baltimore, MD:
"I'd put $6,000 into stocks and $4,000 in fixed-rate investments. Those stocks would include General Electric (GE), Bank of America (BAC), Smithfield Foods (SFD) and EOG Resources (EOG). The Standard & Poor's 500 in 2004 should have a strong start but a lackluster finish. Energy, health care and consumer staples should do best."
Sheldon Jacobs, editor of The No-Load Fund Investor newsletter (www.sheldonjacobs.com) in Irvington-On-Hudson, NY:
"I recommend a mix of $7,500 U.S. stock funds, $1,000 international stock funds, $1,000 bond funds and the rest cash. I like Legg Mason Opportunity Trust, Baron Small Cap and Artisan Mid Cap Value for U.S. stocks. Longleaf Partners International and Artisan International Value are strong international funds. I like Harbor Bond in bonds. I expect a 10 percent increase in stock market prices next year."
Elizabeth Jetton, president-elect of the Financial Planning Association and president of Financial Vision Advisors, both based in Atlanta, GA:
"The stock market will be a good place to be. Good solid dividend-paying stocks will play a more important role because new tax law changes favor dividend yields. Interest rates are more likely to go up than down. Stay away from long-term bonds because the possible reward doesn't always offset the risk of going out long term. Stick with the short end and nothing longer than five to seven years in duration."
Hugh Johnson, chief investment officer for First Albany Corp. in Albany, NY:
"A relatively young investor with a long time horizon and strong stomach should put all $10,000 in the stock market in 2004. My choices are Cisco Systems (CSCO), Siebel Systems (SEBL) and Intel Corp. (INTC) in technology; Staples (SPLS), the Gap (GPS) and Target (TGT) in consumer cyclicals; and Newmont Mining (NEM( and Inco (N) in basic materials. I expect the total return of the stock market to be just under 10 percent."
Martin Mauro, senior economist with Merrill Lynch in New York City:
"I'd put $4,000 of that money in bonds. Of that portion, 40 percent would go into single-A rated corporate bonds, 10 percent preferred stock, 15 percent Treasury securities, 15 percent agency securities such as Fannie Mae, 5 percent in a high-yield bond fund and 15 percent in mortgage-backed securities. Remember that if rates go up in 2004, prices of longer maturity bonds will decline more than those of shorter maturities."
James Paulsen, chief investment officer of Wells Capital Management in Minneapolis, MN:
"Our current recommendation is $8,000 stocks and $2,000 bonds, which means we're heavier in stocks than usual. About 10 to 20 percent of that stock portion should be international equities. The stock market should have a better first half than second half in 2004. Continued profit momentum and low interest rates will dominate the first half, but rising interest rates may flatten the stock market's second-half performance."
George Putnam, editor, The Turnaround Letter newsletter (www.turnarounds.com) in Boston, MA:
"Investors should put as much money into stocks as they can, so long as they can still sleep at night. Try for as much portfolio diversity as possible, though energy stocks look cheap and telecommunications has begun to rebound. My favorite stocks in energy are Input/Output (IO), KCS Energy (KCS) and Forest Oil Corp (FST). In telecom, I like Lucent Technologies (LU), SBC Communications (SBT) and AT&T Wireless (AWE). The economy is going to continue to strengthen in 2004, with continued stock gains."
Sam Stovall, senior investment strategist with Standard & Poor's in New York City:
"In the second year of a bull market, I'd focus on larger-cap stocks that have relatively high earnings quality and are economically sensitive. Stocks we like for capital gains include Affiliated Computer Services (ACS), Analog Devices (ADI), Landstar System (LSTR), Nextel Partners (NXTL), Zimmer Holdings (ZMH), Cardinal Health (CAH), Citigroup (C), D.R. Horton (DHI), and Sysco (SYY). We're bullish, just not raging bulls."
Diane Swonk, chief economist with Bank One Corp. in Chicago, IL:
"All $10,000 should be put into a Standard & Poor's 500 index fund because the market is going up a lot more in 2004, with 20 percent gains possible. While gains will be across the board, there will be a lot of positive movement in technology and manufacturing, outside of autos. We're looking for the economy to grow 4.5 percent in 2004. It doesn't hurt that it's an election year, since you should never bet against a politician's willingness to spend in an election year."
Editor's Note: Andrew Leckey's column, "Successful Investing" appears regularly in the print edition of The Bull & Bear Financial Report.
